Potential Weaknesses of Nominal GDP Targeting Include

Multiple Choice

Potential weaknesses of nominal GDP targeting include

A) it is more complicated to explain to the public than inflation targeting and thus the public might be confused about the objectives of the central bank.
B) it implies that the central bank will respond to slowdowns in the real economy even if inflation is not falling.
C) real GDP growth that is below potential or inflation that is below the inflation objective will encourage more expansionary monetary policy.
D) it focuses not only on controlling inflation but also explicitly on stabilizing real GDP.